Conditions slow in nation’s hottest housing markets

April figures from CoreLogic show a slowdown in housing market conditions in Sydney and Melbourne, with capital city dwelling values recording their lowest month-on-month rise since 2015.

The CoreLogic Hedonic Home Value Index for April found that dwelling values increased by just 0.1 per cent across the combined capital cities during the month.

According to CoreLogic head of research Tim Lawless, the moderation in growth was due largely to a flat result (0.0 per cent m/m change in dwelling values) in Sydney, Australia’s largest capital city housing market.

“The result for Melbourne was also lower than previous months of 2017, with dwelling values up 0.5 per cent over the month,” Mr Lawless added.

Mr Lawless noted that the results should be viewed against a backdrop of an “ever-evolving” regulatory landscape aimed at slowing investment and interest-only mortgage lending.

“Mortgage rates have been edging higher, particularly for investors and interest-only loans, as well as rental yields, which have been hovering around record lows. The higher cost of debt, as well as stricter lending and servicing criteria, has likely dented investment demand over recent months,” he explained.

“In a city like Sydney, where more than 50 per cent of new mortgage demand has been from investors, a tighter lending environment for investment purposes has the potential to impact housing demand more than other cities.”

The latest housing finance data from the ABS showed that investors comprised 57 per cent of new mortgage demand in NSW, excluding refinanced loans. This is substantially higher than the national average of 48 per cent, or Victoria, where new mortgage commitments for investors comprised 46 per cent of the market.

CoreLogic says the softer results seen across the country’s two largest capital cities comes after “dramatic” capital gains were recorded over the second half of 2016 and the first three months of 2017.

Between July 2016 and the end of March 2017, Sydney dwelling values surged 11.3 per cent, while Melbourne values increased by 12.6 per cent in the same period.

The April results therefore mark the weakest monthly change in dwelling values across the Sydney market since December 2015, when CoreLogic reported a 1.2 per cent fall in Sydney dwelling values. Further, the soft reading comes after dwelling values have risen by 75.1 per cent over the past five years, an annual rate of growth of 15 per cent over this period.

The strongest housing market is currently in Hobart, where home values have risen by 5.1 per cent over the past three months.

Hobart’s housing market is now the third-best performing capital city on an annual basis, according to CoreLogic, with dwelling values increasing by almost 14 per cent over the past 12 months.

Most other capital cities also recorded softer growth conditions in April than for the first three months of 2017. However, Mr Lawless said: “The trends generally remain positive, with quarterly growth of 2.9 per cent across the combined capitals index.”